Students are being forced to drop out of college because their parents are unable to get credit union loans, it has emerged.

And other members of credit unions are being forced to resort to moneylenders.

Close to 300 credit unions have now been ordered by regulators to restrict their lending to consumers, the Irish Independent has learned.

Loyal members, with good credit records, are being turned down for loans, credit union managers said.

Some 70,000 people have joined the State's 409 credit unions in the past two years in the hope of getting access to credit. But now it has emerged that seven out of 10 credit unions have had lending limits imposed by the Central Bank, according to numerous sources in the sector.

The severity of the restrictions varies from one credit union to another, but most said they were in the dark about the criteria being used to apply the limits.

Some of the restrictions are based on the total amount that can be given out in any one month, with others limiting the amount which can be loaned to any one member.

Regulators have imposed more lending limits in the past few months, with some credit unions unsure why they have been told to hold back on lending.

Some credit unions have been told that they can have no more than €5,000 loaned out to each member at any time.

If someone comes in seeking a €2,000 loan to fund a child going to college, but already has a car loan for €10,000, the credit union is barred from giving out the new loan.

Silena Gilleece of the Credit Union Managers Association said this was resulting in parents being forced to pull children out of third-level courses.

Moneylenders

"Parents are being left with no option but to go to moneylenders or tell their children they cannot go back to college, as the parents simply do not have the money," Ms Gilleece said.

Some credit unions have loan rates as low as 6pc for education loans, as encouraging learning is seen as part of the ethos of the non-profit credit union sector.

A letter -- seen by the Irish Independent -- sent to Central Bank regulators by the president of the Irish League of Credit Unions Jimmy Johnstone questions the newly imposed lending limits.

"The league board, like its member credit unions, is exasperated by the imposition of far-reaching regulatory restrictions which are directly responsible for credit unions not being able to lend to long-standing, loyal members."

It goes on to say that members are finding themselves unable to pay essential utility bills because "their credit union has been crippled in its ability to reschedule or extend their loan".

The restrictions have been imposed despite the sector having loaned out just 50pc of the savings in its books.

This is in contrast to banks which have up to 160pc of their deposits loaned out.

Ms Gilleece said it was not unusual for a credit union with 5,000 members to be told it could lend out no more than €100,000 in any month. This meant it was restricted to just 20 loans of €5,000 each a month.

A spokesman for the Irish League of Credit Unions said: "The vast majority of credit unions have sufficient funds available to lend to members once an appropriate evaluation of the members' ability to repay has been completed."

Asked about the restrictions, a spokesman for the Central Bank said it was acting to protect the savings of members.